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After spending MUCH time searching, I have found this topic started
many times in the group archive, but i've never seen a final solution
given in AFL. I would greatly appreciate assistance with the AFL code
or reference to a prior solution.
The standard AddToComposite function produces a "price weighted"
composite. For analyzing the breadth of a sector, for
instance, "unweighted" composites are more appropriate and revealing.
I have seen the term "equal weighted" used for what i am calling
an "unweighted" composite, so i will explain in boring detail what i
am looking for just to be clear.
By unweighted composite, i refer to one that is produced by
calculating an arithmetic or geometric average of the day to day %
change for each component, so that each component has equal weight
(no weighting is introduced by the calculation). I am interested in
the arithmetic average - the simplest form, but i don't know how to
initialize the starting value and then cumulate(?) the successive %
change averages for the open, high, low, close (volumes are simply
added). I have seen references regarding problems with averaging
values for high and low for this type of composite, so if necessary,
a composite calculated on the close only will suffice. I am only
interested in the average changes between end-of-day values, but
would like to produce candlesticks of the composites if possible.
Assuming closing values only, each composite will start with an
initial value (like 100) and then, for each day, the average of all
the %changes (from the previous day) will be added to the preceding
value. Using a simple 3 component composite as an example, assume for
the second value of the composite (remember the first value will be
100), we have the following %changes.
Component1 = +1.2%
Component2 = +2.4%
Component3 = -1.7%
So the first day's average %change = ( 0.012 + 0.024 - 0.017 ) / 3
100 + ((0.012 + 0.024 - 0.017) / 3) + (the next day's average %
change) + ...
The component values for volume are just added (or averaged) to get
the daily values.
TIA for any help.
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